Polycom Announces Revenues of $353 Million for Fourth Quarter 2012

Wed Jan 23, 2013 4:05pm EST

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* Sequential Revenue Growth in All Major Product Categories

SAN JOSE, Calif.--(Business Wire)--
Polycom, Inc. (Nasdaq: PLCM), the global leader in open standards-based unified
communication and collaboration (UC&C), today reported financial results for the
fourth quarter ended December 31, 2012. 

Fourth quarter 2012 consolidated net revenues were $353 million, up 5 percent
sequentially, growing in all product categories, compared to $335 million for
the third quarter of 2012 and down 9 percent year-over-year compared to $386
million for the fourth quarter of 2011. Non-GAAP net income for the fourth
quarter of 2012 was $31 million, or 17 cents per diluted share, compared to
non-GAAP net income of $17 million or 10 cents per diluted share for the third
quarter of 2012, and non-GAAP net income of $68 million, or 38 cents per diluted
share for the fourth quarter of 2011. GAAP net income for the fourth quarter of
2012 was $2 million, or 1 cent per diluted share, compared to GAAP net income of
$50 million, or 28 cents per diluted share, for the same period last year. All
periods presented in this release have been adjusted to reflect the
classification of Polycom`s Enterprise Wireless Solutions business as
discontinued operations. The reconciliation between GAAP net income and non-GAAP
net income is provided in the tables at the end of this release. 

"Polycom has executed very well, demonstrating clear product leadership during
the UC&C market transition in 2012," stated Andrew M. Miller, Polycom President
and Chief Executive Officer. "We are excited to begin 2013 with what we believe
is the most comprehensive product portfolio in the industry and improved sales
and go-to-market capabilities that enable new business models for collaboration,
including software, cloud-delivered video, and virtualization." 

"We are pleased to report sequential revenue growth in all product categories,
including UC Platform, which is above a quarter billion dollar per year run
rate," continued Eric Brown, Polycom Chief Operating Officer and Chief Financial
Officer. "Services revenue also increased both sequentially and year-over-year
in line with our increased focus on this area of the business." 

On a geographic basis, consolidated net revenues from continuing operations for
the fourth quarter of 2012 were comprised of:

* 50 percent Americas, or $175.2 million, an increase of 2 percent sequentially
and a decrease of 3 percent year-over-year; 
* 26 percent Europe, Middle East, and Africa (EMEA), or $93.4 million, an
increase of 19 percent sequentially and a decrease of 10 percent year-over-year;
and 
* 24 percent Asia Pacific, or $84.4 million, a decrease of 2 percent
sequentially and a decrease of 18 percent year-over-year.

By product line, inclusive of its service component, consolidated net revenues
from continuing operations for the fourth quarter of 2012 were comprised of:

* UC Group Systems of $238.2 million, an increase of 5 percent sequentially, and
a decrease of 8 percent year-over-year; 
* UC Personal Devices of $46.8 million, an increase of 2 percent both
sequentially and year-over-year; and 
* UC Platform of $68.0 million, an increase of 6 percent sequentially and a
decrease of 15 percent year-over-year.

In Q4 2012, Polycom generated a total of $66 million in operating cash flow and
completed share repurchases of $5 million. Operating cash flow on a trailing 12
month basis was $187 million. Deferred revenue balances increased 2 percent
sequentially to $250 million. 

Q4 2012 Business Highlights

* Announced a royalty-free license offering for an interoperable implementation
of H.264 Scalable Video Coding (SVC) software technology. 
* Unveiled a comprehensive set of breakthrough products at our Strategy Day in
October, including:

* Polycom RealPresence CloudAXIS Suite, a software extension of the Polycom
RealPresence Platform for private and public cloud deployments - available in
both an enterprise and partner/service provider edition - that enables universal
access to enterprise-grade video collaboration to any business (B2B) or consumer
(B2C) at the highest quality, reliability, and security 
* Powerful Polycom RealPresence Platform enhancements, including the industry`s
first open standards-based SVC (Scalable Video Coding), with 3X HD multipoint
video call capacity for greater scalability, dramatically lower TCO, superior
performance, and backwards- and forwards-compatibility to protect customer
investments-all available through a software update 
* Polycom RealPresence Collaboration Server 800s, Virtual Edition, the
industry`s first multi-protocol, integrated software MCU that runs on
industry-standard servers 
* Next-generation video endpoints, including new Polycom RealPresence Group
Series products, the new ultra-slim Polycom RealPresence VisualEdge Executive
Desktop offering, and Polycom RealPresence software for PCs and mobile devices. 
* Launched Polycom VVX 600 solutions, offering workers a flexible and intuitive
phone that integrates seamlessly with popular UC&C productivity applications and
Bluetooth headsets for hands-free privacy. Users can also join video conferences
via the optional Polycom VVX Camera, which Polycom also unveiled for both
Polycom VVX 600 and Polycom VVX 500 business media phones. 
* Introduced a series of new customer financing options that help free customers
from the limitations of quarterly capital expense budgets and allow more
organizations to implement UC&C solutions that fully meet their needs. 
* Announced enhancements to the Company's video content management solutions,
including a new cloud-delivered version of the Polycom RealPresence Media
Manager and Polycom RSS 4000 v8.5, which help organizations record, stream,
manage and view live and on-demand video content quickly, easily and
cost-effectively. 
* Announced the worldwide availability of the Polycom HDX Series 3.1, a software
update for the Company's popular HDX video collaboration solution for executive
desktops and rooms.

Earnings Call Details

Polycom will hold a conference call today, January 23, 2013, at 5:00 p.m.
EST/2:00 p.m. PST to discuss its fourth quarter financial results. Andrew M.
Miller, President and CEO, and Eric Brown, Chief Operating Officer and Chief
Financial Officer, will host the call. You may participate by viewing the
webcast at www.polycom.com/investors or, for callers in the U.S. and Canada, you
may participate by calling 800.707.8704 and for callers outside of the U.S. and
Canada, by calling 303.223.4360. The pass code for the call is "Polycom." A
replay of the call will also be available at www.polycom.com or, for callers in
the U.S. and Canada, at 800.633.8284 and, for callers outside of the U.S. and
Canada, at 402.977.9140. The access number for the replay is 21643789. A replay
of the call will be available on www.polycom.com for at least three months. 

Forward Looking Statements and Risk Factors

This release contains forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995
regarding future events, future demand for our products, and the future
performance of the Company, including statements regarding the comprehensiveness
of our product portfolio and improved sales and go-to-market capabilities that
enable new business models for collaboration, and future expectations for
continued growth of our UC Platform revenues. These forward-looking statements
are subject to risks and uncertainties that may cause actual results to differ
materially, including the impact of competition on our product sales and for our
customers and partners; the impact of increased competition due to consolidation
in our industry or competition from companies that are larger or that have
greater resources than we do; potential fluctuations in results and future
growth rates; risks associated with global economic conditions and external
market factors; the market acceptance of our products and changing market
demands, including demands for differing technologies or product and services
offerings; our ability to successfully integrate our acquisitions into our
business; possible delays in the development, availability and shipment of new
products due to engineering, manufacturing or other delays; increasing costs and
differing uses of capital; changes in key personnel that may cause disruption to
the business; the impact of restructuring actions; and the impact of global
conflicts that may adversely impact our business. Many of these risks and
uncertainties are discussed in the Company`s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2012, and in other reports filed by Polycom with
the SEC. Polycom disclaims any intent or obligations to update these
forward-looking statements. 

Polycom reserves the right to modify future product plans at any time. Products
and/or related specifications referenced in this press release are not
guaranteed and will be delivered on a when and if available basis. 

GAAP to non-GAAP Reconciliation

To supplement our consolidated financial statements presented on a GAAP basis,
Polycom uses non-GAAP measures of operating results, net income and income per
share, which are adjusted to exclude certain costs, expenses, gains, and losses
we believe appropriate to enhance an overall understanding of our past financial
performance and also our prospects for the future. These adjustments to our
current period GAAP results are made with the intent of providing both
management and investors a more complete understanding of Polycom's underlying
operational results and trends and our marketplace performance. For example, the
non-GAAP results are an indication of our baseline performance before gains,
losses, or other charges that are considered by management to be outside of our
core operating results. In addition, these adjusted non-GAAP results are among
the primary indicators management uses as a basis for our planning and
forecasting of future periods. The presentation of this additional information
is not meant to be considered in isolation or as a substitute for net income or
diluted net income per share prepared in accordance with generally accepted
accounting principles in the United States. 

About Polycom

Polycom is the global leader in open standards-based unified communications and
collaboration (UC&C) solutions for voice and video collaboration, trusted by
more than 415,000 customers around the world. Polycom solutions are powered by
the Polycom RealPresence Platform, comprehensive software infrastructure and
rich APIs that interoperate with the broadest set of communication, business,
mobile and cloud applications and devices to deliver secure face-to-face video
collaboration in any environment. Polycom and its ecosystem of over 7,000
partners provide truly unified communications solutions that deliver the best
user experience, highest multi-vendor interoperability, and lowest TCO Visit
www.polycom.com or connect with us on Twitter, Facebook, and LinkedIn to learn
how we're pushing the greatness of human collaboration forward. 

© 2013 Polycom, Inc. All rights reserved. POLYCOM, the Polycom logo, and the
names and marks associated with Polycom`s products are trademarks and/or service
marks of Polycom, Inc. and are registered and/or common law marks in the United
States and various other countries. All other trademarks are property of their
respective owners.

                                                                                                                                                                                          
 POLYCOM, INC.                                                                                                                                                                            
 Condensed Consolidated Statements of Operations                                                                                                                                          
 (In thousands, except per share amounts)                                                                                                                                                 
 (Unaudited)                                                                                                                                                                              
                                                                                                                                                                                          
                                                                              Three Months Ended                                   Twelve Months Ended                                    
                                                                              December 31,                December 31,             December 31,                  December 31,             
                                                                              2012                        2011                     2012                          2011                     
 Revenues:                                                                                                                                                                                
 Product revenues                                                             $      261,874              $      303,461           $      1,042,484              $      1,138,050         
 Service revenues                                                                    91,152                      82,769                   350,144                       264,139           
 Total revenues                                                                      353,026                     386,230                  1,392,628                     1,402,189         
                                                                                                                                                                                          
 Cost of revenues:                                                                                                                                                                        
 Cost of product revenues                                                            109,506                     120,906                  426,369                       439,995           
 Cost of service revenues                                                            36,704                      31,364                   142,827                       103,930           
 Total cost of revenues                                                              146,210                     152,270                  569,196                       543,925           
                                                                                                                                                                                          
 Gross profit                                                                        206,816                     233,960                  823,432                       858,264           
                                                                                                                                                                                          
 Operating expenses:                                                                                                                                                                      
 Sales and marketing                                                                 116,312                     113,401                  464,353                       428,829           
 Research and development                                                            55,085                      51,431                   208,510                       190,322           
 General and administrative                                                          25,910                      20,629                   98,285                        81,661            
 Amortization of purchased intangibles                                               2,512                       2,671                    9,830                         5,542             
 Restructuring costs                                                                 195                         4,657                    22,024                        9,396             
 Acquisition-related expenses                                                        2,271                       1,764                    14,064                        9,688             
 Total operating expenses                                                            202,285                     194,553                  817,066                       725,438           
                                                                                                                                                                                          
 Operating income                                                                    4,531                       39,407                   6,366                         132,826           
                                                                                                                                                                                          
 Other income (expense), net                                                         (858     )                  1,778                    (3,868     )                  (1,672     )      
                                                                                                                                                                                          
 Income from continuing operations before provision for income taxes                 3,673                       41,185                   2,498                         131,154           
 Provision (benefit) for income taxes                                                39,081                      (4,545   )               38,056                        5,246             
 Income (loss) from continuing operations                                            (35,408  )                  45,730                   (35,558    )                  125,908           
                                                                                                                                                                                          
 Income from operations of discontinued operations, net of taxes                     2,178                       3,843                    9,888                         9,906             
 Gain from sale of discontinued operations, net of taxes                             35,425                      -                        35,425                        -                 
 Net income                                                                   $      2,195                $      49,573            $      9,755                  $      135,814           
                                                                                                                                                                                          
                                                                                                                                                                                          
 Basic net income (loss) per share:                                                                                                                                                       
 Income (loss) per share from continuing operations                           $      (0.20    )           $      0.26              $      (0.20      )           $      0.71              
 Income per share from operations of discontinued operations, net of taxes    $      0.01                 $      0.02              $      0.06                   $      0.06              
 Gain per share from sale of discontinued operations, net of taxes            $      0.20                 $      -                 $      0.20                   $      -                 
 Basic net income per share                                                   $      0.01                 $      0.28              $      0.06                   $      0.77              
                                                                                                                                                                                          
 Diluted net income (loss) per share:                                                                                                                                                     
 Income (loss) per share from continuing operations                           $      (0.20    )           $      0.26              $      (0.20      )           $      0.69              
 Income per share from operations of discontinued operations, net of taxes    $      0.01                 $      0.02              $      0.06                   $      0.05              
 Gain per share from sale of discontinued operations, net of taxes            $      0.20                 $      -                 $      0.20                   $      -                 
 Diluted net income per share                                                 $      0.01                 $      0.28              $      0.06                   $      0.75              
                                                                                                                                                                                          
 Number of shares used in computation of net income (loss) per share:                                                                                                                     
 Basic                                                                               175,519                     176,729                  176,878                       176,426           
 Diluted                                                                             175,519                     179,331                  176,878                       181,195           


 Note:  Earnings per share amounts for continuing operations, discontinued operations and net income, as presented above, are calculated individually and may not sum due to rounding differences.                                                                                                                   
        As a result of the net loss from continuing operations for the three and twelve month periods ended December 31, 2012, all potentially issuable common shares have been excluded from the diluted shares used in the computation of earnings per share for those periods as their effect is anti-dilutive.   
                                                                                                                                                                                                                                                                                                                     


 POLYCOM, INC.                                                                                                                                                                   
 Reconciliation of GAAP to Non-GAAP Net Income                                                                                                                                   
 (In thousands, except per share amounts)                                                                                                                                        
 (Unaudited)                                                                                                                                                                     
                                                                                                                                                                                 
                                                                         Three Months Ended                                   Twelve Months Ended                                
                                                                         December 31,                December 31,             December 31,                December 31,           
                                                                         2012                        2011                     2012                        2011                   
                                                                                                                                                                                 
 GAAP net income                                                         $      2,195                $      49,573            $      9,755                $      135,814         
                                                                                                                                                                                 
 Income from operations of discontinued operations, net of tax                  (2,178   )                  (3,843   )               (9,888   )                  (9,906   )      
 Gain from sale of discontinued operations, net of tax                          (35,425  )                  -                        (35,425  )                  -               
 Tax expense on company reorganization                                          38,836                      -                        38,836                      -               
 Amortization of purchased intangibles                                          4,421                       4,529                    17,465                      11,201          
 Restructuring costs                                                            195                         4,657                    22,024                      9,396           
 Acquisition-related expenses                                                   2,271                       1,764                    14,064                      9,688           
 Stock-based compensation expense                                               23,690                      18,276                   88,761                      63,853          
 Effect of stock-based compensation on warranty rates                           128                         181                      669                         546             
 Severance costs associated with CFO retirement                                 -                           -                        929                         -               
 Legal costs associated with the indemnification of a former officer            -                           (87      )               236                         1,552           
 Impairment (recovery) of an investment in a private company                    -                           (421     )               -                           79              
 Benefit related to the resolution of a multi-year tax audit                    -                           -                        -                           (7,487   )      
 Income tax effect of other non-GAAP exclusions                                 (3,444   )                  (6,696   )               (25,612  )                  (20,078  )      
                                                                                                                                                                                 
 Non-GAAP net income                                                     $      30,689               $      67,933            $      121,814              $      194,658         
                                                                                                                                                                                 
 GAAP earnings per share:                                                                                                                                                        
 Basic                                                                   $      0.01                 $      0.28              $      0.06                 $      0.77            
 Diluted                                                                 $      0.01                 $      0.28              $      0.06                 $      0.75            
                                                                                                                                                                                 
 Non-GAAP earnings per share:                                                                                                                                                    
 Basic                                                                   $      0.17                 $      0.38              $      0.69                 $      1.10            
 Diluted                                                                 $      0.17                 $      0.38              $      0.68                 $      1.07            
                                                                                                                                                                                 
 Number of shares used in computation of GAAP earnings per share:                                                                                                                
 Basic                                                                          175,519                     176,729                  176,878                     176,426         
 Diluted                                                                        175,519                     179,331                  176,878                     181,195         
                                                                                                                                                                                 
 Number of shares used in computation of non-GAAP earnings per share:                                                                                                            
 Basic                                                                          175,519                     176,729                  176,878                     176,426         
 Diluted                                                                        177,953                     179,331                  178,945                     181,195         
                                                                                                                                                                                 


 POLYCOM, INC.                                                                           
 Condensed Consolidated Balance Sheets                                                   
 (In thousands)                                                                          
 (Unaudited)                                                                             
                                                                                         
                                               December 31,          December 31,        
                                               2012                  2011                
                                                                                         
 ASSETS                                                                                  
 Current assets                                                                          
 Cash and cash equivalents                     $        477,073      $        375,241    
 Short-term investments                                 197,196               159,426    
 Trade receivables, net                                 194,654               210,804    
 Inventories                                            99,960                93,284     
 Deferred taxes                                         48,916                37,282     
 Prepaid expenses and other current assets              55,454                51,241     
 Assets held for sale                                   -                     67,130     
 Total current assets                                   1,073,253             994,408    
                                                                                         
 Property and equipment, net                            133,319               126,884    
 Long-term investments                                  50,333                56,772     
 Goodwill and purchased intangibles                     608,802               623,121    
 Deferred taxes                                         28,406                23,356     
 Other assets                                           21,238                20,264     
 Total assets                                  $        1,915,351    $        1,844,805  
                                                                                         
                                                                                         
 LIABILITIES AND STOCKHOLDERS' EQUITY                                                    
 Current liabilities                                                                     
 Accounts payable                              $        89,983       $        110,719    
 Accrued payroll and related liabilities                39,469                38,546     
 Taxes payable                                          4,736                 -          
 Deferred revenue                                       158,482               138,486    
 Other accrued liabilities                              63,018                59,288     
 Liabilities held for sale                              -                     14,119     
 Total current liabilities                              355,688               361,158    
                                                                                         
 Non-current liabilities                                                                 
 Deferred revenue                                       91,061                82,898     
 Taxes payable                                          15,598                16,813     
 Deferred taxes                                         236                   558        
 Other non-current liabilities                          22,079                13,262     
 Total liabilities                                      484,662               474,689    
                                                                                         
 Stockholders' equity                                   1,430,689             1,370,116  
 Total liabilities and stockholders' equity    $        1,915,351    $        1,844,805  
                                                                                         


 POLYCOM, INC.                                                                                                                                  
 Condensed Consolidated Statements of Cash Flows                                                                                                
 (In thousands)                                                                                                                                 
 (Unaudited)                                                                                                                                    
                                                                                                                                                
                                                                                           Twelve Months Ended                                  
                                                                                           December 31,                 December 31,            
                                                                                           2012                         2011                    
                                                                                                                                                
 Cash flows from operating activities:                                                                                                          
 Net income                                                                                $      9,755                 $      135,814          
 Adjustments to reconcile net income to net cash provided by operating activities:                                                              
 Depreciation and amortization                                                                    61,586                       52,564           
 Amortization of purchased intangibles                                                            20,318                       21,742           
 Provision for excess and obsolete inventories                                                    6,420                        8,567            
 Provision for doubtful accounts                                                                  1,100                        -                
 Stock-based compensation expense                                                                 89,245                       65,262           
 Impairment of private company investments                                                        -                            79               
 Excess tax benefits from stock-based compensation                                                (9,297    )                  (13,430   )      
 Loss on disposals of property and equipment                                                      4,080                        1,537            
 Net gain on sale of discontinued operations                                                      (35,425   )                  -                
 Tax expense on company reorganization                                                            38,836                       -                
                                                                                                                                                
 Changes in assets and liabilities, net of the effect of acquisitions and divestitures:                                                         
 Trade receivables                                                                                16,582                       (63,009   )      
 Inventories                                                                                      (11,428   )                  2,545            
 Deferred taxes                                                                                   (15,933   )                  (12,446   )      
 Prepaid expenses and other assets                                                                (8,835    )                  (3,190    )      
 Accounts payable                                                                                 (22,901   )                  22,816           
 Taxes payable                                                                                    5,123                        13,496           
 Other accrued liabilities                                                                        37,754                       67,298           
 Net cash provided by operating activities                                                        186,980                      299,645          
                                                                                                                                                
 Cash flows from investing activities:                                                                                                          
 Purchases of property and equipment                                                              (67,270   )                  (69,279   )      
 Purchases of investments                                                                         (312,631  )                  (372,567  )      
 Proceeds from sale of investments                                                                52,286                       41,461           
 Proceeds from maturities of investments                                                          229,211                      326,332          
 Net cash received from sale of discontinued operations                                           50,411                       -                
 Net cash paid in purchase acquisitions                                                           (4,583    )                  (163,630  )      
 Net cash used in investing activities                                                            (52,576   )                  (237,683  )      
                                                                                                                                                
 Cash flows from financing activities:                                                                                                          
 Proceeds from issuance of common stock under employee option and stock purchase plans            25,832                       40,798           
 Repurchase and retirement of common stock                                                        (67,901   )                  (64,937   )      
 Excess tax benefits from stock-based compensation                                                9,297                        13,430           
 Net cash used in financing activities                                                            (32,772   )                  (10,709   )      
                                                                                                                                                
 Net increase in cash and cash equivalents                                                        101,632                      51,253           
 Cash and cash equivalents, beginning of period                                                   375,441                      324,188          
 Cash and cash equivalents, end of period                                                  $      477,073               $      375,441          


 These Condensed Consolidated Statements of Cash Flows include combined cash flows of continuing and discontinued operations.                                                           
 The end of period cash and cash equivalents balance for December 31, 2011 includes $200 of cash included within "Assets held for sale" in the condensed consolidated balance sheets.   
                                                                                                                                                                                        


 POLYCOM, INC.                                                                                                                                                                  
 Reconciliations of GAAP Measures to Non-GAAP Measures                                                                                                                          
 (In thousands)                                                                                                                                                                 
 (Unaudited)                                                                                                                                                                    
                                                                                                                                                                                
                                                                        Three Months Ended                                   Twelve Months Ended                                
                                                                        December 31,                December 31,             December 31,                December 31,           
                                                                        2012                        2011                     2012                        2011                   
                                                                                                                                                                                
 GAAP cost of revenues used in inventory turns                          $      146,210              $      152,270           $      569,196              $      543,925         
 Stock-based compensation expense                                              (2,532   )                  (1,591   )               (10,204  )                  (6,267   )      
 Effect of stock-based compensation on warranty rates                          (128     )                  (181     )               (669     )                  (546     )      
 Amortization of purchased intangibles                                         (1,909   )                  (1,858   )               (7,635   )                  (5,659   )      
 Non-GAAP cost of revenues used in inventory turns                      $      141,641              $      148,640           $      550,688              $      531,453         
                                                                                                                                                                                
 GAAP gross profit                                                      $      206,816              $      233,960           $      823,432              $      858,264         
 Stock-based compensation expense                                              2,532                       1,591                    10,204                      6,267           
 Effect of stock-based compensation on warranty rates                          128                         181                      669                         546             
 Amortization of purchased intangibles                                         1,909                       1,858                    7,635                       5,659           
 Non-GAAP gross profit                                                  $      211,385              $      237,590           $      841,940              $      870,736         
 Non-GAAP gross margin                                                         59.9     %                  61.5     %               60.5     %                  62.1     %      
                                                                                                                                                                                
 GAAP sales and marketing expense                                       $      116,312              $      113,401           $      464,353              $      428,829         
 Stock-based compensation expense                                              (9,722   )                  (8,131   )               (36,791  )                  (27,022  )      
 Non-GAAP sales and marketing expense                                   $      106,590              $      105,270           $      427,562              $      401,807         
 Non-GAAP sales and marketing expense as percent of revenues                   30.2     %                  27.3     %               30.7     %                  28.7     %      
                                                                                                                                                                                
 GAAP research and development expense                                  $      55,085               $      51,431            $      208,510              $      190,322         
 Stock-based compensation expense                                              (5,387   )                  (4,228   )               (20,195  )                  (14,850  )      
 Non-GAAP research and development expense                              $      49,698               $      47,203            $      188,315              $      175,472         
 Non-GAAP research and development expense as percent of revenues              14.1     %                  12.2     %               13.5     %                  12.5     %      
                                                                                                                                                                                
 GAAP general and administrative expense                                $      25,910               $      20,629            $      98,285               $      81,661          
 Stock-based compensation expense                                              (6,049   )                  (4,326   )               (21,571  )                  (15,714  )      
 Severance costs associated with CFO retirement                                -                           -                        (929     )                  -               
 Legal costs associated with the indemnification of a former officer           -                           87                       (236     )                  (1,552   )      
 Non-GAAP general and administrative expense                            $      19,861               $      16,390            $      75,549               $      64,395          
 Non-GAAP general and administrative expense as percent of revenues            5.6      %                  4.2      %               5.4      %                  4.6      %      
                                                                                                                                                                                
 GAAP total operating expenses                                          $      202,285              $      194,553           $      817,066              $      725,438         
 Stock-based compensation expense                                              (21,158  )                  (16,685  )               (78,557  )                  (57,586  )      
 Amortization of purchased intangibles                                         (2,512   )                  (2,671   )               (9,830   )                  (5,542   )      
 Restructuring costs                                                           (195     )                  (4,657   )               (22,024  )                  (9,396   )      
 Acquisition-related expenses                                                  (2,271   )                  (1,764   )               (14,064  )                  (9,688   )      
 Severance costs associated with CFO retirement                                -                           -                        (929     )                  -               
 Legal costs associated with the indemnification of a former officer           -                           87                       (236     )                  (1,552   )      
 Non-GAAP total operating expenses                                      $      176,149              $      168,863           $      691,426              $      641,674         
 Non-GAAP total operating expenses as percent of revenues                      49.9     %                  43.7     %               49.6     %                  45.8     %      
                                                                                                                                                                                
 GAAP operating income (loss)                                           $      4,531                $      39,407            $      6,366                $      132,826         
 Stock-based compensation expense                                              23,690                      18,276                   88,761                      63,853          
 Effect of stock-based compensation on warranty rates                          128                         181                      669                         546             
 Amortization of purchased intangibles                                         4,421                       4,529                    17,465                      11,201          
 Restructuring costs                                                           195                         4,657                    22,024                      9,396           
 Acquisition-related expenses                                                  2,271                       1,764                    14,064                      9,688           
 Severance costs associated with CFO retirement                                -                           -                        929                         -               
 Legal costs associated with the indemnification of a former officer           -                           (87      )               236                         1,552           
 Non-GAAP operating income                                              $      35,236               $      68,727            $      150,514              $      229,062         
 Non-GAAP operating margin                                                     10.0     %                  17.8     %               10.8     %                  16.3     %      
                                                                                                                                                                                


 POLYCOM, INC.                                                                                                                                   
 Summary of Stock-Based Compensation Expense                                                                                                     
 (In thousands)                                                                                                                                  
 (Unaudited)                                                                                                                                     
                                                                                                                                                 
                                                           Three Months Ended                          Twelve Months Ended                       
                                                           December 31,            December 31,        December 31,            December 31,      
                                                           2012                    2011                2012                    2011              
                                                                                                                                                 
 Cost of sales - product                                   $        873            $        707        $        3,593          $        2,501    
 Cost of sales - service                                            1,659                   884                 6,611                   3,766    
 Stock-based compensation expense in cost of sales                  2,532                   1,591               10,204                  6,267    
                                                                                                                                                 
 Sales and marketing                                                9,722                   8,131               36,791                  27,022   
 Research and development                                           5,387                   4,228               20,195                  14,850   
 General and administrative                                         6,049                   4,326               21,571                  15,714   
 Stock-based compensation expense in operating expenses             21,158                  16,685              78,557                  57,586   
                                                                                                                                                 
 Total stock-based compensation expense                    $        23,690         $        18,276     $        88,761         $        63,853   


Polycom, Inc.
Laura Graves, 408-586-4271 (Investors)
laura.graves@polycom.com
Shawn Dainas, 408-586-3768 (Press)
shawn.dainas@polycom.com

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